Section 194IB is on payment of rent in excess of Rs.50,000/- per month or part of the month during the previous financial year by any person being an individual or Hindu undivided family (tenant/lessee or payer) to a resident (to landlord, lessor or payee), is liable to deduct income tax at the rate of 5% on the rent credited or paid during the previous financial year.
This section was introduced by the Finance Act 2017 with effect from 1st June 2017, which means all the transactions with effect from 1st June 2017 with respect to rent paid or credited in excess of Rs.50,000/- per month are liable to income tax under section 194IB. If the landlord, lessor, or payee is a non-resident, then liability arises under section 195 instead of section 194IB.
Individual or Hindu undivided family, who is liable to audit under clause (a) or clause (b) of section 44AB during the previous financial year in which such sum is credited or paid.
The Tenant is required to collect the Permanent Account Number (PAN) of the Landlord for the purpose of section 194IB, which he will be required in furnishing the challan cum statement in Form-26QC.
For the purpose of furnishing such challan cum statement in Form 26QC, the Tenant or payer is not required to apply for the Tax deduction account number (TAN).
5%. [No surcharge or health and education cess] and if PAN is not available then as per section 206AA, the tax rate would be 20% instead of 5%.
Form 26QC is the challan cum statement that is required to be furnished by the tenant/ lessee or payer for reporting such transactions which are liable to deduct tax under section 194IB on the amount of sum credited or paid.
Important Point: Form 26QC is to be filed for each unique tenant and landlord combination for the respective shares.
example 1: [case of 1 tenant and 2 landlords]
Mr. Y and Mr. Z are the owners of property X. They both decided to let out the property to Mr. A.
Because of 2 unique combinations, two Form 26QC are required to be furnished i.e. First Form for Mr. A and Mr. Y and the other form is for Mr. A and Mr. Z.
example 2: [case of 2 tenants and 2 landlords]
If property “A” is rented by Mr. B and Mr. C to Mr. D & Mr. E, in that case, we are having 4 unique combinations, so we need to file four Form 26QC i.e. Form 1 for Mr. B and Mr. D, Second Form for Mr. B and Mr. E, Third would be for Mr. C and Mr. D and the Fourth would be Mr. C and Mr. E.
(a) at the end of the relevant financial year in which such sum is credited or paid or in the month when the rented premises are vacated/ there is a termination of your rental/Lease agreement.
However, if the rent/lease agreement period is covering more than one financial year that case tenant/ lessee or payer is mandatorily required to file such a statement at the end of each financial year.
example: If the rent/ lease agreement is for 11 (eleven) months and the rent period starts from 1st January 2020 which will end on 30th November 2020. In this case, our rent period covers two financial years i.e. the financial year 2019-20 [covers 3 months] and financial year 2020-21 [covers 8 months].
The tenant is required to file two times the Form 26QC (a) first at the end of the financial year 2019-20 i.e. at the end of March 2020 (b) at the time of termination of the agreement i.e. at the end of 30th November 2020.
Tenant/ lessee or payer can furnish an online form (Form 26QC) for furnishing challan cum statement TDS on rent of property by availing the facility provided by the TIN website.
By clicking this link you will be redirected to the TIN website for such purpose.
The due date in the case of section 194IB for the purpose of deposit of such deducted tax is 30 [thirty] days from the end of the month in which such deduction is made. Payment under section 194IB [includes basic tax, interest (if any), and fee (if any)]
For example: if a tenant/ lessee or payer has made a payment of rent for the month of March 2020 then he or she is required to deposit such tax by the end of 30th April 2020 i.e. within 30 [thirty] days from the end of the month in which such deduction is made.
Yes, as per section 234E read with rule 31A of the income tax rules, 1962, if a person fails to file the challan cum statement in Form 26QC electronically within 30 days from the end of the month in which such deduction is made, then he shall be liable to pay a sum, by way of a fee under section 234E which is Rs.200/- per day till the default period continues.
Form 16C is the TDS certificate that is to be issued by the deductor (tenant/ lessee or payer) to the deductee (landlord/ lessor or payee) in respect of the tax deducted at source and deposited under section 194IB.
We can download Form 16C from the website of the TRACES.
As per Income Tax Rule 31 (3B), every person responsible for deduction under section 194IB shall have to furnish the TDS certificate in Form No.16C to the payee within 15 days from the due date for furnishing the challan-cum-statement in Form No.26QC.
Landlord, lessor, or payee is required to provide PAN (Permanent Account Number) to the deductor i.e. to the tenant/ lessee or payer so that he or she can furnish the required information regarding such transaction to the income tax department.
The landlord can verify the taxes deducted under his or her Form 26AS after login into the income tax website.
What if I have forgotten to save the acknowledgment Number of Form 26QC. Is there any way to retrieve that?
Yes, you can easily get the acknowledgment number after entering the following details at this link.
(a) PAN of tenant
(b) PAN of Landlord
(c) Total Payment as entered in Form 26QC.
(d) Financial year
(e) Captcha Code
Case1: Where rent agreement/lease agreement contains the period which is covered under more than one financial year.
Mr. X is a landlord who has given on rent his apartment on the second floor to Mr. Y for 11 months [commencing from 1st December 2019 to 31st October 2020] at Rs.70,000/- per month.
In this case, the calculation would be made for two financial years i.e. for the financial year 2019-20 which covers the period from 1st December 2019 to 31st March 2020 and financial year 2020-21 which will cover the rest of the period of the agreement from 1st April 2020 to 31st October 2020.
Now let us see, how to calculate TDS u/s 194IB in this case for these financial years:
Case2: Where rent agreement/lease agreement contains the period which is covered under the same financial year.
Mr. X has given on rent of his apartment on the 3rd Floor to Mr. Y for Rs.55,000/- per month for the period of 12 months starting from 1st April 2019 to 31st March 2020.
Total rent payable for the previous financial year credited or paid is Rs.6,60,000/- (Rs.55,000 * 12), which becomes the income of Mr. X.
Mr. Y is required to deduct TDS u/s 194IB at the rate of 5% (assuming he has obtained PAN of the deductee i.e. PAN of the landlord/ lessor or payee).
TDS amount comes out to Rs.33,000/- (Rs.6,60,000* 5%), which is required to be calculated on the total amount of rent payable (credited or paid during the previous financial year).
The said amount is to be paid by Mr. Y within 30 days from the end of the month of the deduction i.e. on or before the 30th April 2020.
Mr. Y is required to issue Form 16C from the portal of TRACES within 15 days from the end of the due date of furnishing challan cum statement in Form 26QC.
In case you want me to explain the concept visually, you can refer to the below link for the same.